Profitability Reports of our clients from August 2018
Friday, 07 of September 2018
World Macro Panorama,
WORLD MACRO PANORAMA
As the holiday season comes to an end, the American markets continue to move towards new highs, contrary to the old adage "Sell in May and go away", this year the good business results and commercial approaches between the United States and the Union European Union reduced the uncertainty of investors who bet on a bull market during the summer.
In the balance positive factors have overcome the concerns. On the one hand, the strong US economic growth, with a preliminary GDP of 2Q18 + 4.1% annualized from 2.2% 1Q18, the continuous repurchase of shares and the favorable business results with 80% of the companies exceeding expectations, They impressed the markets with confidence. On the other hand, the risk of rising interest rates, the political uncertainty facing the legislative elections in the US and the growing commercial tension are factors worth monitoring despite the current euphoria.
In relation to the interest rates of the FED, it is expected that in the meeting of the end of September they will increase by 25 bps from the current range of 1.75% to 2.0%, it would be the third increase in the year; according to the tone of the previous statements and the evolution of the macro indicators, this would not be the last movement of the entity, anticipating an additional increase for the month of December.
On the other hand the threats of commercial war, in relative calm with Europe but in increasing tendency with China, continue being the main generator of news for the markets. It was learned that the US is studying new tariffs on products worth 200,000 million dollars, which would generate a response from the Asian country with tariffs on 60,000 million US dollars. Although the rounds of negotiations have not been able to reach agreements, the political analyzes suggest that in the short term these measures will not be carried out, since important industries would be affected and this would weigh in the November legislative elections, leaving in disadvantage to the republican party.
In this regard, in China the impact has been felt in financial markets but not in real activity. According to published figures, in July China recorded a surplus of 28,100 million dollars with a growth of 12.2% in exports sustained by the recent weakness of the yuan against the dollar, despite the stock market was left over 2% in the last month with a tendency contrary to the other Asian markets that closed in positive territory.
In Europe, we do not have announcements by the Central Bank during the month of August, however in its last message the monetary authority reiterated that it expects to maintain the current rate levels at least one more year or until it is necessary, however it is important to keep on the radar that from September the purchases of assets will be reduced to 15,000 million euros until the end of December, date on which the program would end. The preliminary CPI data for August stood at 2.0%, below the estimates (previously estimated and 2.1%), while the underlying CPI remains far from the ECB's objective. For its part, the preliminary GDP for 2Q18 moderated to 2.1% from the 2.5% registered in the first quarter.
At the political level, the uncertainty is at the expense of Italy, both at the social level with the recent migratory measures, and at the economic level at the door of the presentation of the general budgets for 2019, which should seek the reduction of the current public debt . The rating agency Fitch ratified the note at BBB, deteriorating its outlook from stable to negative; the impact on the bonds was immediate and the risk premium shot up to the highest level in the last five years and ended the month at 290 points.
Thus, the risk factors remain, on the one hand with the commercial tensions between the United States and its main partners, and on the other side the difficulties that the Italian budgetary decisions could generate. However, we do not lose sight of the fact that some surprise in the macroeconomic environment would trigger a change in the rate of normalization of the Central Banks.
Financial markets (as of August 31)
Significant retracements in European markets, the IBEX35 lost -4.78% during the month of August, followed by the FTSE100 with a fall of -4.08%, while the EUROSTOXX50 closed the month -3.76% below. So far this year, the largest declines in shares have been experienced by Spain and Germany with drops in their rates of more than 6% and 4% respectively.
The EUR / USD ended around 1.1599 with a decline of -0.79%, in a month of generalized strengthening of the US currency with respect to its peers and currencies of emerging countries. For its part, the EUR / GBP ended around 0.8952, advancing 0.52% which reflects the difficulties of the pound in the current political conditions.
In the United States, we have extraordinary advances in stock prices, while treasury bonds dropped to 2,853 levels for the 10-year benchmark. The Nasdaq led the gains with the recovery of technology + 5.84%, followed by the S & P500 that added + 3.03% and the Dow Jones that recorded gains of 2.16%.
On the other hand the Asian markets finished in mixed terrain, while the Sensex and the Nikkei225 advanced 2.76% and 1.38% respectively, the Hang Seng closed at 27,888 points with a decrease of -2.43%.
In the commodity market, the benchmark Brent oil rose to 77.42 dollars / barrel + 4.27% monthly, while gold fell -1.86% compared to the previous month, recording losses for the current year of -7.81%.